This study examined the Effectiveness of Taxation As An Instrument For the Control of Money in Circulation. Taxation which is an instrument used by the government to levy individuals and corporations directly or indirectly as a source of getting money for the maintenance of the state, maintaining economy stability, boasting aggregate investment, reduce inflation amongst others is adjudged to be the major source of public revenue. The problem of the study is that people see taxation as a tool for the exploitation of the ordinary man by the government and has generated a great deal of sentiments among taxpayers, some of who argue that the government unjustifiably rid them of investments and consumption income. The main objectives of the study are to examine the important role of taxation in an economy, to evaluate the various types and classes of taxation, to identify the major problems of taxation, and to determine the impact of taxation on money in circulation. The research questions and hypotheses are structured in line with the objectives of the study. The research is survey and empirical in nature. The main source of data for the study is secondary data. The instrument used for data collection include data on petroleum profit tax (PPT) and company income prtax (CIT), paid by quoted companies in Nigeria spanning the period of 1999 to 2007 which was available. The average money in circulation (AMC) are also obtained for each year, and are classified according to the total tax collected (PPT + CIT) = Total tax collected (TTC). Data were analysed through the statistical tools of simple Linear regression and correlation analysis. Therefore, the correlation coefficient between the Total Tax Collected (TTC) and the Average Money in Circulation (AMC) shows that there is a positive linear relationship. The study found that the chief source of revenue for most industrialized countries is the income tax. The income tax is levied on both individual personal incomes and corporations profit. The work concludes that taxation is a veritable instrument used by government authorities to regulate and collect sums of money from both natural and legal persons for the benefit of the whole citizens. On the other hand, taxes reduces a tax payers wealth (money) and this causes the individuals to re-arrange his/her economic priorities
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